Pay Ratios in Aotearoa New Zealand - Anglican Advocacy
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Pay Ratios in Aotearoa New Zealand
Pay Ratios in Aotearoa New Zealand
Are the levers set right?
We want an Aotearoa where everyone in paid work earns
enough to look after their family and raise their tamariki
with dignity. From the CEO to the cleaner, working hard
should mean being paid fairly.
Page 1 anglicanadvocacy.org.nz
Pay Ratios in Aotearoa New Zealand
A pay ratio is the ratio between the highest-paid One of the most common inequality measures,
and average or lowest paid in a company. There called the Gini coefficient, has shown very little
has been rising global concern about ballooning change over the last 20 years¹. That is not what
pay ratios in recent years. This discussion paper you would expect looking at changes in
looks at pay ratios between the highest and compensation over that same time. It also does
lowest paid in Aotearoa companies and describes not match many people’s lived experience. Why
some of the options to begin addressing the does the story told by our graph, and the Gini
disparity. measure differ?
Chief executive remuneration in New Zealand has One explanation might be that the Gini measure
gone up by 67% over the period 2000-2020. (The is unresponsive to changes at the extreme ends.
most significant increase in this period happened For example, taking most of the income from the
during and immediately after the Global Financial poorest 1% and giving it to the wealthiest 1%
Crisis. Why this happened is a topic that warrants would not significantly move our inequality
further investigation but is beyond the scope of rating.
this report.) Minimum wage earners have been
lifted by government policy with a similar Regardless of the reason, the pay ratios of more
increase of 63%. While that is positive, those than 100 New Zealand companies provides some
gains have been lost in other areas as we will see insight into where many people experience
later (fig. 3). Average workers have seen the least inequality: the workplace. After all, inequality is a
gain, with an increase of 31% over the same relational issue.
period.
Figure 1: The big-picture trend, two decades of NZ wages
This chart shows the average CEO total remuneration packages, the average New Zealand worker wage,
and the minimum wage from 2000 to 2020. All figures are inflation-adjusted and expressed in 2020 dollars.
$1,057,453
Average CEO
$632,215
$42,760 Average worker • Minimum wage $56,160
$24,047 $39,312
2000
2000 2002
2002 2004
2004 2006
2006 2008
2008 2010
2010 2012
2012 2014
2014 2016
2016 2018
2018 2020
Mean CEO wages from Helen Roberts, Otago University, tracking around 20 NZ CEOs each year. Minimum and mean NZ worker
wages from Reserve Bank NZ. All figures are inflation-adjusted to be in 2020 dollars. Yes, the bottom of the y-axis is at 0.
Page 2 anglicanadvocacy.org.nzPay Ratios in Aotearoa New Zealand Table 1: Pay ratios for 2019/2020 Pay-ratio Organisation Highest pay Pay-ratio Organisation Highest pay 151:1 A2 Milk Company 6,237,000 23:1 Summerset 887,625 139:1 Fonterra 5,267,090 23:1 TourismHoldings 830,917 136:1 Fletcher Building 5,110,923 22:1 Briscoes 219,038 120:1 Air New Zealand 4,680,572 22:1 New Zealand Post Group 906,632 113:1 Telstra Corporation 4,660,000 22:1 Rakon 837,332 100:1 Xero 4,144,000 21:1 ColonialMotorCompany 879,829 90:1 EbosGroup 3,742,058 21:1 New Zealand Exchange 860,000 85:1 IAG NZ 3,163,000 20:1 Freightways 843,483 82:1 Warehouse 3,333,000 20:1 Scales 813,448 74:1 Fisher & Paykel Healthcare 3,026,377 20:1 Restaurant Brands 806,000 74:1 Sky City Entertainment 2,788,366 19:1 NZOil&Gas 794,232 71:1 Mainfreight 2,951,572 19:1 PGG Wrightson 770,440 63:1 BNZ 2,910,700 18:1 Steel&TubeHoldings 702,880 63:1 Auckland International Airport 2,344,456 18:1 TilLogistics 670,306 54:1 Sanford 2,120,000 18:1 AMP New Zealand 650,000 52:1 Mercury Energy / MightyRiverPower 1,933,432 17:1 Hallenstein Glassons 706,119 50:1 Contact Energy 2,131,716 17:1 Oceania Healthcare 637,029 50:1 Genesis Energy 2,071,613 16:1 IkeGPS 658,413 49:1 Meridian Energy 2,039,841 16:1 GreenCross/LifePharmacy/BeautyDirect 655,000 49:1 Port of Tauranga 2,022,501 15:1 Serko 630,734 49:1 Chorus 2,017,453 15:1 AWFMadison 608,348 49:1 ASB New Zealand 1,831,020 14:1 Super Retail Group 596,079 48:1 TrustPower 1,985,150 14:1 Turners 593,985 45:1 Sky Network TV 1,878,300 14:1 AFTPharmaceuticals 592,353 43:1 Kiwi Property Group 1,579,217 14:1 AbanoHealthcare 584,560 40:1 Vector 1,925,001 14:1 VistaGroup 571,297 39:1 Kathmandu 1,617,567 13:1 Vital/TeamTalk 552,870 37:1 Ryman Healthcare 1,356,641 13:1 Pacific Edge 533,000 35:1 Downer 1,281,700 13:1 Cavalier 526,669 31:1 Z Energy 1,240,908 12:1 Comvita 515,000 31:1 MetlifeCare 1,199,615 12:1 PushPay 492,060 30:1 ANZ New Zealand 1,361,356 11:1 My Food Bag 500,000 29:1 Spark 1,200,000 10:1 BlisTechnologies 399,906 28:1 MichaelHillInternational 1,159,712 9:1 WellingtonDriveTechnologies 392,800 27:1 Synlait Milk limited 1,101,511 9:1 SouthPortNewZealand 382,004 26:1 T&Gglobal 1,074,271 9:1 GEO Limited 361,000 26:1 Delegat'sGroup 1,067,000 8:1 SeaDragon 345,000 25:1 Arvida 1,164,787 8:1 AlliedFarmers 314,349 25:1 Mercer 1,045,145 7:1 FMS/Sealegs 289,675 25:1 NZME 1,034,907 6:1 QEXLogistics 250,000 25:1 Skellerup Holdings 932,000 5:1 Marsden Maritime Holdings 223,452 24:1 Radius 870,000 3:1 MoaGroup 125,000 23:1 Eroad 944,000 3:1 CannaSouth 104,352 23:1 MetroGlass 934,546 Page 3 anglicanadvocacy.org.nz
Pay Ratios in Aotearoa New Zealand
Figure 2: CEO pay vs company size
Generally speaking, CEO pay relates to the size of the company, although this is not always the case and
there are some significant outliers in the graph.
A2 Milk Co
Fletchers
Telstra
Xero Fonterra
BNZ
Sky Network TV
CEO total pay package
ANZ New Zealand
Mercer
Logscale
AMP New Zealand
Marsden Maritime Holdings
Organisation size (total assets)
Logscale
Page 4 anglicanadvocacy.org.nzPay Ratios in Aotearoa New Zealand Figure 3: Percentage changes in key indicators, 2007 – 2020 Although the income of the lowest and average paid employees have risen, they have risen slower than increases in the cost of renting. As with every other social issue, housing remains a key factor. But not the only factor. Page 5 anglicanadvocacy.org.nz
Pay Ratios in Aotearoa New Zealand
Table 2: Weeks for CEO to earn the yearly salary of the lowest-paid
employee for selected companies
Weeks to earn lowest-paid
Organisation
annual salary
A2 Milk Company 0.3
Fonterra 0.4
Fletcher Building 0.4
Air New Zealand 0.4
Telstra Corporation 0.5
EbosGroup 0.6
IAG NZ 0.6
Warehouse 0.6
Fisher & Paykel Healthcare 0.7
Sky City Entertainment 0.7
Mainfreight 0.7
BNZ 0.8
Auckland International Airport 0.8
Sanford 1.0
Mercury Energy / MightyRiverPower 1.0
Table 2 shows the number of weeks it takes for a CEO to earn the yearly salary of the lowest-paid
employee in that company. The CEO of Rymans (the lowest in this sample) received the yearly salary of
an employee in about 7 days. It is difficult to argue that they could have worked that much harder than
frontline people looking after the dignity of our elders.
While employment was once seen as the answer to poverty, being employed is no longer a guarantee of
escaping poverty traps. There are an estimated 56,825 children living below the poverty line in
households with a working parent.²
Our social services agencies are seeing an increase in people looking for support who have a job. Or,
more often, multiple jobs. The question we face is about the way we value work and workers. What is our
vision for society?
Page 6 anglicanadvocacy.org.nzPay Ratios in Aotearoa New Zealand
I can’t get my kids into sport, or afford the dentist. If my old
car breaks down we go without a meal. It’s depressing. I’m
so tired, I feel like there is no point. I cry at night when the
kids are in bed... I can’t keep up.
There’s always another bill around the corner that kills us.
Our power is on prepay which is more expensive. But we got
too far behind. I can’t see a way out.
Both comments are from people who required social service support despite being in full-time
employment with the same employer for more than 3 years.
What story does this tell us?
No one factor can give a complete picture of the says something about those values regardless of
way a company values its people. A simple pay carefully worded ethical statements on company
ratio for example doesn’t capture the differences websites
between long and short-term incentives or the
possibility of a large retirement payment High inequality lowers social cohesion and trust.
influencing the average. Inequality leads to worse social outcomes across
society, harms social mobility, and increases
However, while pay ratios don’t tell the entire barriers to kids breaking out of cycles of poverty.
story, they do tell a story. When you stand back The rising inequality indicated by the pay ratios in
and look at the big picture, the rising inequality Figure 1 reflects peoples’ lived experience.
that many people feel is evident.
None of this is inevitable. It has been built by the
Companies in New Zealand operate not only decisions we have made. The rising pay ratios we
under the Companies Act and their own are seeing in New Zealand are not unique.
constitutions, but also within a broad social However, compared with other countries, there
licence framed by the values we hold and aspire are fewer measures being put in place in New
to as a nation. Giving ever-increasing rewards to Zealand as a response. Following are descriptions
the highest earners in our society, while leaving of some of the responses being seen elsewhere.
the average and lower-income earners behind
Some Possible Levers
Pay ratio disclosure Switzerland held a referendum on a pay ratio cap,
which failed. The intention of a pay ratio cap
The UK, India, and the United States all require would be to limit the ballooning of CEO payout of
pay-ratio disclosure. The UK legislation includes step with the workforce. If a company board
disclosure of CEO to lower quartile pay, with a wanted to give their CEO another million dollars
requirement to explain the ratio. Pay ratio they would need to pay a proportionally
reporting has also been discussed in Australia equivalent increase to their lowest-paid workers
and the EU and forms part of the non-binding to keep the ratio the same. However, some fear
reporting guidelines in Germany. Good that in practice companies would find
governance begins with transparency. workarounds for adding to CEO compensation,
and companies below the cap would see it as a
Pay ratio caps target rather than a limit.
Israel has passed a pay cap of 44:1 that covers
bank executives and insurance companies.³
Page 7 anglicanadvocacy.org.nzPay Ratios in Aotearoa New Zealand
Before increase After increase Change
responsive to people who invest with them, we
Highest wage $1,800,000 $2,200,00 18% will see more people take an interest in the ethics
Lowest wage $41,600 $50,844 18% of the companies they support. As such people
Lowest wage (per hour) $20.00 $24.44 $4.44 concerned about ESG (environmental, social,
Ratio 43.3 43.3
governance) considerations may start to ask
questions about how workers are treated at
Say on Pay legislation home as well as abroad.
‘Say on Pay’ is a term used for a wide range of Worker representation
policies that give shareholders a vote on
executive remuneration. Various forms of say on Worker participation or co-determination are
pay are in place in many countries, including the terms for a variety of practices that give workers a
United Kingdom, the United States, Switzerland voice in corporate decision-making. This may be
and Australia. The specifics differ, including on the board, on remuneration committees, or in
whether the vote is binding or non-binding, some countries such as Germany with a two-tier
includes exit packages, or has provision for the governance structure, on an advisory board.
removal of board members in the event of
shareholders voting against a decision. In The goal in one way or another is to help
Australia, if 25% of shareholders vote against the reorientate a company to ensure that workers
remuneration package at two consecutive annual have some say in conditions that affect them. Co-
general meetings the board may have to go up for determination seeks to address an imbalance
re-election. where CEOs and people on boards who make
decisions about CEO compensation may have
Shareholder Advocacy interests that largely align while having no real
connection with anyone in a low-wage job.
One of the benefits of both pay-ratio reporting
and say-on-pay legislation is that they add a data The empathy gap that this power imbalance
point for shareholders who take an interest in the creates may be helped somewhat by some form
companies they support and give an additional of co-determination.
tool to be able to engage.
Companies can lead the way
Blackrock - an investment firm managing around
$5 trillion in assets - encouraged companies that Companies have as much impact on the lives of
executive pay should only be increased each year, people in New Zealand as people in government
if at all, at the same level of the wider employee do. Government legislation is not always the
base, and in line with inflation. Large answer. There are numerous examples of
compensation increases should not be justified companies supporting the dignity and future of
principally by benchmarking.⁴ their workers. The Living Wage is a well-known
example. It is the voluntary practice of paying a
Blackrock made this appeal based on financial minimum figure, arrived at independently, based
risk, not just ethics. They are questioning the on the actual cost of living.
objectivity and decision making of boards who
continue to raise CEO pay, out of step with their Self-imposed pay ratio caps have been the
workers. It is good that a call for genuine ethical practice of several companies and cooperatives
and values-based conversations to take place for years. Well-known examples include Ben and
around the board table aligns with the call for Jerry’s (7:1) and the Mondragon Corporation, a
wise governance by a 5 trillion dollar investment federation of worker cooperatives in Spain
firm. employing over 80,000 people, who have a
current cap of around 5:1.
As investing is made easier through organisations
like Sharesies⁵, or ethical KiwiSaver firms who are
Page 8 anglicanadvocacy.org.nzPay Ratios in Aotearoa New Zealand
Dan Price, CEO of Gravity Payments famously directly dealing with inequality. This option may
raised the pay for minimum wage workers by also provide a way of addressing the poverty-
reducing his own compensation.⁶ related outcomes at the bottom end of widening
pay ratios without requiring companies to pay
A number of New Zealand companies offer share their employees more, which some companies
schemes for workers. These give workers a stake simply cannot afford to do.
in the company as well as allowing them to have
a voice at AGMs. Contact Energy, Countdown, and Charity
Port of Tauranga, among others, have worker
share schemes. In some cases, the share schemes When we were putting this discussion paper
still cost enough to put them out of reach of the together it was suggested to us by a former CEO
lowest-paid employees. and board member that a possible solution might
be to require companies who earn over a certain
Anglican Advocacy is starting to collect stories after-tax profit to donate a percentage to charity.
from New Zealand companies taking their own However, charity should be a last resort in the
approaches to better support workers. We will event of unforeseen circumstances. It should not
profile more homegrown solutions in the future. be a policy choice in the foreseen circumstances
of not looking after our workforce. The
Wealth tax suggestion is a wealth tax made palatable - an
argument that accepts the need for a wealth tax
Some form of additional income tax bracket or but doubts the Government's ability to
wealth tax offers the widest range of options for administer it wisely.
Final comment
CEO pay has ballooned in the previous decades, in pressure on boards to stop supporting in-work
while average and low paid workers have lagged poverty and ballooning CEO pay. While New
well behind. In both CEO pay and pay ratios we Zealand is not unique in having escalating pay
see the rising inequality that many people feel. ratios, there are fewer measures being put in
The loss of dignity and stress that comes from place here to try to reset the balance in the way
working full time and still struggling to make large companies operate.
ends meet is a reflection of the values we have as
a society. Low wages have dropped far enough This all matters because inequality matters. It
behind that we have rising rates of in-work matters because although we live in a global
poverty. economy, events like Covid-19 remind us that we
also live locally. “Team of 5 million” and kindness
With an increasing number of people investing, as rhetoric aside, we really are in this together. And
well as taking an interest in the social, how the big picture looks in coming years will say
environmental, and governance values of the a lot about the values we actually hold, rather
companies they support, there will likely be a rise than the ones we aspire to.
Report
This report has been prepared by Anglican Advocacy Ōtautahi by Jolyon White and Matthew Bartlett.
Many thanks to Helen Roberts from Otago University for historic CEO averages and compensation data.
Page 9 anglicanadvocacy.org.nzPay Ratios in Aotearoa New Zealand
References
1. Income inequality: The Social Report 2016 – Te pūrongo oranga tangata (msd.govt.nz) Compare
this report to our Gini rating for the previous two years of 32.7 and 32.6
2. Plum, A., Pacheco, G., & Hick, R. (2019). In-Work Poverty in New Zealand. Auckland
3. https://www.sbs.com.au/news/israel-passes-law-to-cap-bankers-salaries
4. BlackRock Investment Stewardship, Letter on Executive Remuneration, 2017, https://
www.blackrock.com/corporate/literature/publication/blk-remuneration-letter-investor-
stewardship-0117.pdf
5. An investment with Sharesies does not currently allow you exercise any voting rights as a
shareholder, though it is an issue that they have said they are looking into.
6. Paul Keegan, Here’s What Really Happened at That Company That Set a $70,000 Minimum Wage
(November 2015), Inc. Magazine.
Disclaimers
CEO remuneration - which includes bonuses and whether they are a Living Wage employer. In
performance pay - is for the reporting year ending these cases, the actual lowest paid employee
in 2020. We have endeavoured to use the most may be paid slightly higher than our estimate.
accurate information available, with thanks to The differences at the lower end have little
Otago University Associate Professor Helen impact on the overall picture. However, if any
Roberts for the data. company feels their ratio differs significantly to
what is reflected here, we would gladly discuss
In terms of the lowest paid employees, some data with them and make any changes appropriate.
came from personal conversations with
employees, and some came from anonymised Lowest paid employees include permanent
collective bargaining information from unions. As contracts such as cleaners. Companies have
such there may be people paid under the rate we control over their pay through their procurement
found. For other companies with a known low- policy. It does not include temporary or
paid work force we estimated a number slightly occasional contracts.
below or above Living Wage, depending on
For further information or comment please contact Director of Anglican Advocacy
Jolyon White | jolyon@anglicanadvocacy.org.nz | 0276122230
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